After a few years of living like a stingy old man surviving on frozen dumplings and occasional ramen, I was able to add some zeros to my savings account. I liked seeing them every time I went into the banking app to pay off my credit card. My savings had grown enough to make me feel less scared if life for some reason decided to drop a brick on me one day and gift me with giant medical bills.
But I disliked my money just sitting there idly doing nothing. So, I decided to do something that I had never done before. I invested. A lot. Pretty much all my savings actually. Was it reckless? Yes. Was it worth it? Yes. Did I make a profit? Luckily, yes. But most importantly, it opened my mind to the changing world of finance and investing and how I can grab a slice for myself.
There are inherent risks and nothing I say here is financial advice. But I wanted to write this to help you, especially if you’re new to the scene like I was just a couple of months ago. Some of what’s below may come across as common sense and popular sayings, but I’ve found them to be healthy reminders to stay levelheaded while navigating the market. I hope you find them useful, too.
1. Greed is stronger than fear.
This is the single most important lesson I took from my experience. You should always have a plan and not let your greed cloud your judgment. The more control you have over your emotions, the better off you’ll be in deciding when to enter and exit the market. Never give in to the hype or panic. Instead, do your research, balance your appetite for risk and learn to control your greed. Because whether it’s housing, stocks, or cryptocurrencies, market cycles are driven by our emotions. Ideally, you want to buy before mania and sell into greed.
2. Never invest more than you can afford to lose.
I’m saying it because I invested more than I could afford to lose. Thankfully, I invested at the opportune time to take out the seed money and just let my profits run. I did pour weeks and weeks of research before I got in but I still consider myself lucky to have come out of it unscathed. Investing is not like gambling. It is gambling. You need luck. But you also need to carefully strategize and measure how much you’re willing to invest. And once you’ve done the deed, consider it as money you’ve lost and cross your fingers. Maybe even your toes.
3. Trend is your friend, most of the time.
I was never a fan of trends. Not in fashion. Not in fidget spinners. Not in people doing popular dances on TikTok. In fact, I refused vehemently to take part in them. But when it comes to market trends, you’ll have a tough time if you don’t make friends with them. You want to be following along the motion of a pendulum swing. Yes, market sentiment can turn on a dime and backstab you. In most cases, however, your portfolio will perform better if you understand the macro momentum of where things are and where they will head next. But don’t look at minute charts, they’re neither trends nor friends. They’re just noise that’ll make you go crazy.
4. Keep learning without losing yourself.
At first, I frantically buried myself in dozens of articles and videos not really because I wanted to learn but because I was nervous about my investments. I looked at my phone too many times. I cannot stress enough how important it is to continue learning but not in ways that affect your mental health negatively. Try developing a routine where you dedicate a few hours a week to learning about where your investments stand as well as larger market trends and the world economy. I promise it’ll make you a better investor and give you the peace of mind you need. Take a step back and think bigger.
5. Invest with conviction and trust your guts.
If you’re in it to make some quick money, chances are you’ll lose it like most day traders. If there’s an opportunity or a promotion that seems too good to be true, it’s probably a scam. Make sure you’re investing in legitimate projects and companies that you like and believe in, not just because others are doing it. Invest in ones that you think will play a vital role in how we live and work in the future. And while controlling your emotions is important, so is trusting your gut feelings. It’s a delicate balance. But if you find something you love, be ready to pounce. Just like finding the right person and asking them out on a date. Just like making an offer on a house you know will be your home for decades. When you know, you know.
6. Everyone is an investing prophet.
Meaning no one is an investing prophet. Some people act and talk like one, but no one truly knows what’s going to happen. Not even top hedge funds. Yes, those conniving schmucks have more tools and information to manipulate markets, but they still cannot predict everything. Just look at the whole GameStop frenzy. And Michael Burry, who correctly bet against subprime mortgages in 2008, tweeted earlier this year about a Bitcoin crash with a big head and shoulders pattern. It didn’t happen. All I’m saying is don’t get swayed by predictions. Do your own research, formulate a plan and stick to it. By the way, I don’t hate Mr. Burry, just hedge funds.
7. Look for the ship ready to sail, not sink.
Just another way of saying be greedy when others are fearful and vice versa. Most people are not interested in investments that have been consolidating for a long time at a price that feels low and boring. Smart money loves entering during this accumulation phase. They sell when the price eventually goes up, which triggers the distribution phase. This is when tourists, mostly retail investors who are desperate to make money, succumb to the hype and panic buy. They’re the same ones who panic sell at a loss as the price plummets. Stop chasing after juicy price actions and start thinking like smart money to find better entry points.
8. Media makes life seem better than it is.
Life is not kind. For most, life is not good, especially with the pandemic making it so much worse for the lower and middle class. You hear about a kid who turned a few hundred dollars into a million dollars. But you don’t hear about investors who turned their emergency savings into nothing. You hear about the government potentially considering another round of stimulus checks but you don’t hear much about inflation, which is an insidious thief. Always keep in mind that there are two sides to the story and be critical of what you absorb. That’s why it’s good to have a shortlist of reliable sources you can turn to for news and education regarding your investments. After all, media manipulation and disinformation are designed to give us a nice bedtime story, not reality.
9. Time in the market beats timing it.
Sadly, rampant market manipulation is another thing. From the imbalance of access to information to things like dark pools, hedge funds and the rich have the means to make the game favorable to them. If you’re a retail investor, you’re already in a losing game. And the only way to beat them is by being patient. Never try to time peaks or bottoms. There are better entry points than others and finding them comes with lots of research and practice, but patience is your greatest tool. Plus, it pays off to invest during the down years and just sit tight. Remember that bull markets make you money but bear markets make you rich.
10. Take risks to financial freedom.
The truth is, I’m extremely anti-risk. But at some point earlier this year, it just clicked to me that simply working hard wasn’t going to get me to financial freedom. So, I decided to stop playing it safe and put my money to work. I was hesitant at first but now I’m having a blast learning and sharing it too. I hope to continue taking the right risks with the right mindset to turn them into real opportunities. And by real opportunities, I mean being able to live in a luxury dumpster filled with quality trash. Thanks for reading and more to come from The Money Raccoon.
Where to start on research?
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